Sula Vineyards Ltd Management Discussions

Indian Economy

Financial Overview

India continued to be among the fastest growing economies globally in FY 2025 on the back of solid macroeconomic fundamentals. In an era marked by escalating global trade tensions and persistent geopolitical uncertainties, the Indian economy has demonstrated remarkable resilience and growth supported by strong domestic demand. Over the last 5 years, Indian GDP has grown by more than 50% from INR 201 Trillion in FY20 to INR 315 Trillion in FY25 (Source: RBI).

In FY25, the Indian economy is estimated to have grown at by 6.5% YoY driven by higher private consumption and government spending with particularly better traction in construction, trade, and financial services sectors (Source: NSOs Second Advance Estimates).

Indias inflation remained in control in FY25 with consumer price index estimated to be at 4.6%. Over the last 3 years, retail inflation in India has followed a steady downward path, falling from 6.7% in FY23 to 5.4% FY24, and further to 4.6% FY253.

Going forward, the Indian economy is expected to continue to be a bright spot in the global economy with GDP growth expected to remain healthy at 6.5% in FY26 as well despite the potential uncertainty caused by potential trade tariffs and geopolitical tensions.

India AlcoBey Market Overview and Outlook

The Indian AlcoBev Market is valued at over $55 Bn in 2024 as per the International Spirits & Wines Association of India (ISWAI). The Indian AlcoBev market is the third largest AlcoBev market globally in terms of volumes (Mn liters) trailing only the United States and China. The sector provides employment opportunities, both directly and indirectly, to an astounding 7.9 Mn individuals in India4.

However, despite the large absolute market size, in terms of per capita consumption, the Indian AlcoBev market continues to significantly below global levels, particularly in case of beer and wine, highlighting the still vast scope of expansion in this sector in the future4.

Going forward over the next few years, the Indian AlcoBev market is expected to grow at 6.9% CAGR in volume terms from 1,068 Mn cases in CY 2023 to ~1,500 Mn cases in CY 20285.

Key Growth Drivers -

• Growing disposable incomes

• Increase in per capita alcohol consumption

• Rising number of women drinkers and cultural change

• Rising number of different alcohol brands and categories

• Expansion in distribution of alcohol across the country, especially in Tier 2 and below cities

India Wine Market Overview and Outlook

Indias wine market is valued at approximately $150-200 Mn (including both domestic and imported wines) with more than 3 Mn cases being sold annually1. Wine is still in a nascent stage in India accounting for <1% of the Indian AlcoBev market and the per capita consumption of wine in India too is less than 50 ml as compared to the world average of 5.5 liters. Therefore, there is vast scope for the Wine sector to grow and expand in India.

Going forward, the Indian wine market is expected to grow at ~15% CAGR over CY 202320282 led by the increasing prosperity and disposable income, rapid urbanization, evolving consumer preferences and increase in number of working women and women drinkers.

Key Growth Drivers

• Aspirational: One of the primary drivers of this growth is the growing popularity of wine among the urban, middle-class population. Today, wine is seen as a sophisticated and aspirational drink.

• Food Pairing: The popularity of Western cuisines, particularly Italian and French, has also boosted the wine market in India.

• Emergence of Vineyards and New Varietals: Another key factor in the growth of the wine industry is the emergence of new wineries and vineyards as well as expansion of the different red, white and rose varietals throughout the country.

• Favourable Demographics: The wine industry in India benefits from a favourable demographic profile that supports its growth. Indias burgeoning middle class that is growing, is open to new experiences and experimentation. The countrys young population people in India are more receptive to trying new experiences and are willing to explore several types of beverages, including wine, providing a promising opportunity for wine companies to tap into this growing market segment.

• Online Ordering & Home Delivery: The COVID-19 pandemic led to the emergence of recent sales channels in the alcobev industry. Home delivery and limited e-commerce options for alcobev gained more prominence for their convenience, better purchase experience, which attracted more customers, including women. This sales channel has a promising future as it can improve the penetration of the alcobev industry, especially since the number of traditional outlets remains limited.

• Premiumisation: Premiumisation grew significantly during the pandemic because consumers wanted to create ‘affordable luxury experiences the comforts of their own homes and were willing to spend more on higher quality products across all alcohol categories, with no sign of this inclination slowing. This trend towards premiumization is expected in the sparkling wine category as well, where high-end bubbles are on an upward trajectory.

• Rise of In-Home Consumption: Post COVID-19, saw a sea of change in consumer behaviour around alcohol consumption, with a shift towards drinking at home.

• Favourable Policies Towards Wine: One of the main drivers of the growth of the wine industry in India is the favourable regulations that treat wine as a distinct and separate category from other alcobev. These regulations have been particularly favourable in the states of Maharashtra and Karnataka, contributing significantly to the growth of the domestic wine industry.